The International Monetary Fund (IMF) has projected that the Nigerian economy would grow by 1.9 per cent in 2018, up from 0.8 per cent in 2017, based on steady oil production and stable economic reforms in the country.
IMF’s senior resident representative in Nigeria, Mr Amine Mati, made the disclosure yesterday while presenting the “Fall 2018 Regional Economic Outlook for Sub-Saharan Africa’’ on Thursday in Abuja.
Mati said that some pick-up in the non-oil economy was also responsible for the predicted growth.
“The recovery is expected to contribute about 0.7 percentage points to the region’s average growth in 2018 and lift activity in Nigeria’s trading partners through stronger remittances, financial spillovers and import demand.’’
He also said that average growth for the region was expected to reach about 3.1 per cent in 2018, up from 2.7 per cent in 2017.
The Fund, however expressed reservation over Nigeria’s rising debt service/revenue ratio and charged the federal government to take steps to address the situation.
Mati said, “Nigeria’s Debt /GDP ratio at between 20-25 percent is quite low but debt servicing which takes about 50 per cent of revenue is certainly high”.
Mr. Mati said that the regional average was worse than the Nigerian scenario with Debt/GDP across Sub-Saharan Africa ranging between 35-57 in the past five years.
He said, interest payment had become a major challenge for the affected countries, as according to him, “A lot more of the resources are going into paying interests and there is less to spend on capital expenditure.”
The IMF chief said that point out that massive revenue mobilization remained the only way to address the challenge but that African nations, especially Nigeria was not doing enough in that regard.
Rather than mobilizing more revenue, he said the current strategy had been to cut expenditure, in an economy with a very poor rate of spending.
The IMF also expressed indifference to the plan of the Nigerian Government to sell off some of her state – owned enterprises [ SOEs], including the Ajaokuta Steel Complex for the purpose of funding the 2018 budget spending gap as an alternative to increased borrowing.
He said, “Adjustment has relied on spending compression rather than revenue mobilization,” and that the nation had huge revenue potentials that remained untapped.
On how to deal with financial flows, the Snr. Resident Rep noted that portfolio inflows could be very volatile and more associated with consumption than investment in the real sectors of the economy.
In her reaction, director-general of the Debt Management Office (DMO), Ms Patience Oniha, disclosed that the organisation was working towards focusing more on foreign exchange risks strategy, especially with the rising interest rates in the United States and other advanced economies.
“Some people have raised concerns about the exchange rate risks on our external borrowing. For instance they say if the exchange rate moves to N400/$1 in the next five years, how would we handle it?
“My answer is that before, the share of the external debt was small, oil prices were good, production was good so, really, there was no need to be worried.
“But now there is need to focus on that. In the new Strategy Plan we have, there is huge focus on risks. Portfolio risks, contingent liability risks, interests risks. Before we were not focused on risk management,” Ms Oniha said.